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Initial coin offerings ("ICOs") are facing increased regulatory scrutiny, and are likely to be seen as securities by agencies. We've written before about the securities exemptions ICOs may use to comply with the Securities and Exchange Commission (the "SEC"): Reg D, Reg CF and Reg A+.

Reg A+ (Tier 2, in particular) has started to get attention in the cryptocurrency world because it offers advantages over the others that make the most sense for digital assets.

The US House of Representatives has passed the "Regulation A+ Improvement Act" (the "Reg A+ Act") that increases the cap on investments under Reg A+.

Increased Reg A+ Caps

Reg A+ is divided into Tier 1 and Tier 2. If you issue an exempt security offering under Tier 1, you can raise up to $20m in a 12-month period. If you issue the offering under Tier 2, you can raise up to $50m in a 12-month period.

The new Reg A+ Act would increase the investment cap by 50% ($30m for Tier 1, $75m for Tier 2).

ICOs & Reg A+

Several ICOs have already used Reg A+: Gab, RideCoin and WeDemand. So Reg A+ has been shown to work in practice for crypto offerings. And with an increase in capital raising potential, it will likely increase.

Limits

There are still a few key limits on using Reg A+:

You can only use SEC-approved exchanges to sell the issued securities.

It requires anti-money laundering checks for all investors.

It requires "offering circulars" that are more extensive than white papers and, for example, require disclosure of risks.

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